EXPLANATORY STATEMENT
Financial Management and Accountability Act 1997, Section 31
Agreements for “Net Appropriations”
The instrument to which this explanatory statement relates
This explanatory statement relates to an instrument (the instrument) made under section 31 of the Financial Management and Accountability Act 1997 (FMA Act), which is entitled Net Appropriation Agreement for Department of Health and Ageing, commencing upon registration on the Federal Register of Legislative Instruments.
The legislative authority under which the instrument is made
Section 31 of the FMA Act enables the Minister for Finance and Administration (the Finance Minister) to enter into agreements with other Ministers for the purposes of items in Appropriation Acts that are marked “net appropriation”.
Section 31 of the FMA Act, together with certain standard provisions of the annual Appropriation Acts, (for example, section 10 of Appropriation Act (No.1) 2004-2005), allows departmental (and in select cases, administered) appropriation items to be increased by amounts received by an agency as specified in the agreement.
Subsection 31(3) of the FMA Act provides that an agreement may be for any period (that is, it need not relate to a particular Appropriation Act or Acts), including a period longer than a financial year. Generally agreements continue until circumstances require their renewal.
Subsection 31(4) of the FMA Act enables the Finance Minister to cancel or vary an agreement at any time without the consent of the other party.
Purpose and operation of the instrument
The instrument identifies the types of receipts which increase an existing appropriation for the Department of Health and Ageing. The instrument is given effect by the annual appropriation Acts, which provide that the relevant departmental or administered appropriation item is increased in accordance with the agreement. This enables the receipts to be spent by the agency.
For example, where an agency sells minor assets, such as its surplus office furniture and fittings, the amounts received from the sale will be available for expenditure by that agency. Without the agreement, any amounts received by the agency would not be available to be spent by the agency, without further appropriation by Parliament.
Notes on the instrument
Specific provisions within the annual Appropriation Acts give effect to the instrument. Therefore, the instrument only has effect while the relevant specific provisions exist in the annual Appropriation Acts.
Eligible receipts covered by the instrument are set out in clause 5.1 of the instrument.
Consultation
The Department of Health and Ageing is the agency affected by this instrument. The agency was provided with drafts of the instrument before the instrument was finalised and agrees with the form of the instrument. As the instrument is for internal machinery of government purposes only, no consultation was considered necessary with other persons (see sections 17 and 18 of the Legislative Instruments Act 2003).
Additional Information
Agreements made under section 31 of the FMA Act are not subject to the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003: see item 19 in subsection 44(2) and item 17 in subsection 54(2) of the Legislative Instruments Act 2003.
Overview
The Financial Management and Accountability Act 1997 was enacted to provide a framework for the financial management and accountability of the Commonwealth. One of its key provisions is section 31, which allows the Minister for Finance to enter into agreements for "net appropriations" with other ministers. This section addresses the problem of ensuring that funds received by government agencies from specified sources, such as the sale of surplus assets, are available for expenditure by those agencies without the need for additional appropriation by Parliament. This legislation was enacted by the Australian Parliament and aims to streamline financial processes and enhance accountability within government departments. The Net Appropriation Agreement for the Department of Health and Ageing, made under this section, specifically identifies the types of receipts that increase existing appropriations for the department, thereby facilitating more efficient use of funds within the agency.
Scope and Application
The Net Appropriation Agreement for the Department of Health and Ageing, made under Section 31 of the Financial Management and Accountability Act 1997, outlines the terms under which the department's appropriation can be increased by certain specified receipts. This agreement applies to the Department of Health and Ageing, allowing it to utilise funds from specified sources such as the sale of minor assets, without the need for additional appropriation from Parliament. The agreement is authorised by the Minister for Finance and Administration, who has the power to enter into such agreements with other Ministers to facilitate the use of net appropriations as defined in Appropriation Acts. These agreements are not limited to the duration of a particular Appropriation Act and can extend beyond a financial year, continuing until circumstances necessitate their renewal or amendment. The Finance Minister retains the authority to cancel or vary the agreement at any time, without requiring consent from the other party involved. The agreement has no jurisdictional reach beyond federal legislation and is designed for internal government machinery purposes, thus not requiring external consultation beyond the affected department. Notably, agreements made under Section 31 of the FMA Act are exempt from the parliamentary disallowance and sunsetting provisions outlined in the Legislative Instruments Act 2003.
Key Provisions
Section 31 of the Financial Management and Accountability Act 1997 (FMA Act) facilitates the creation of agreements known as "net appropriation agreements" between the Minister for Finance and Administration and other ministers. These agreements are intended to enhance departmental appropriations with funds received by specified agencies, as detailed in the agreements. The agreement can cover any period, not limited to a particular financial year, and can be altered or cancelled by the Finance Minister at any time without the consent of the other party. This arrangement allows the Department of Health and Ageing, and potentially other agencies, to use funds received from certain transactions, such as the sale of surplus assets, for their intended purposes without requiring further appropriation by Parliament.
The obligations imposed by this Act on the parties involved include the necessity for the Finance Minister to enter into agreements with relevant ministers to clarify how specific receipts will augment departmental appropriations. The Department of Health and Ageing, as the agency in focus, must comply with the terms of the agreement and ensure that any eligible receipts are managed according to the stipulations of the agreement and the annual Appropriation Acts. These obligations are designed to streamline the financial management processes and ensure that agencies can utilise available funds efficiently.
While the Act does not explicitly outline offences, penalties, or consequences for breach, the nature of the agreements and their reliance on annual Appropriation Acts implies that any non-compliance could lead to financial mismanagement or misallocation of funds. Although specific penalties are not stated within the explanatory statement, breaches could result in significant administrative or financial repercussions, including potential audits or reviews by the relevant parliamentary committees. The absence of parliamentary disallowance and sunsetting provisions for these agreements under the Legislative Instruments Act 2003 suggests that these agreements hold a certain level of permanency and authority, thereby underscoring the importance of adherence to their terms.